- (1.) On an application under Section 256(1) of the Income-tax Act, 1961, the Tribunal has referred the following questions set out at page 2 of the paper book : "1. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that the assessee is the owner of the superstructure at 7, Pretoria Street, Calcutta, though the land over which the superstructures was built was taken on long lease ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in directing to treat the rental income from the property at 7, Pretoria Street, Calcutta, assessable under the head 'Income from house property' and not under the 'Income from business' taken by the Assessing Officer ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in directing to assess the consideration received by the assessee against the sale of first floor together with the proportionate interest in law (land ?) under the head 'Capital gain' and to compute the C. G. in relation to the gain arising from the sale of the first floor of the building at 7, Pretoria Street, Calcutta, as short-term capital gain ?" The assessee is an individual. In the return he has shown the income received from the property at 7, Pretoria Street, Calcutta, and that income he has shown as income from house property. The relevant assessment year is 1989-90. The Assessing Officer noticed in fact that the property, 7, Pretoria Street, Calcutta, was taken on lease from July 9, 1975, by the assessee and the property was later developed by a partnership firm constituted by his three brothers and father. Thereafter, the father of the assessee retired from the partnership and the assessee and his three brothers reconstituted the partnership and developed the property constructing a multi-storeyed building.
(2.) The construction of the building was started during the financial year 1988-89. The said partnership was dissolved in 1987 and the assets and liabilities were distributed among the partners. During the relevant previous year, the first floor of the building was sold to one Kailash Bagaria representing Gain-well Holding Pvt. Ltd., along with the proportionate interest in the land.
(3.) The rent recovered by the assessee from the property which fell to his share was declared under the head "Income from property". The Assessing Officer, while framing the assessment, did not accept the contention of the assessee. According to the Assessing Officer, the rental income received by the assessee must be computed under the head "Income from business" and not under the head "Income from house property" as claimed by the assessee. Similarly, the Assessing Officer also did not accept the claim of the assessee that the consideration received in respect of the sale of the first floor together with the proportionate interest in the land should be computed under the head "Capital gain". It was observed that as the aforesaid income received by the assessee in the course of business activities, the same should be assessed under the head "Income from business".;